The
World Trade Organization (WTO) is the only international organization
dealing with promotion and regulation of international trade at a global
level. Its aims are to help trade flow as freely as possible, to achieve
further liberalization gradually through negotiation, and to provide an
impartial means of settling disputes.

The WTO was established in 1994 to replace the less structured system
of the General Agreement on Tariffs and Trade (GATT) which, since 1948,
had provided a normative framework for international trade. That framework
had been upgraded by subsequent rounds of negotiations, the last of which,
the Uruguay Round, led to the creation of the WTO. The 1994 Agreement
Establishing the WTO introduced an Annex on dispute settlement referred
to as the Understanding on Rules and Procedures Governing the Settlement
of Disputes (DSU). Although the DSU can be regarded as a direct offspring
of the dispute settlement procedures under the old GATT, it has substantially
departed from its predecessor. For this reason, the data contained in
this matrix refers only to the DSU and not to the old GATT dispute settlement
system.

In particular, the main new feature is the creation of the Dispute Settlement
Body (DSB) and the Standing Appellate Body (AB). The DSB is a political
body comprising representatives of all WTO members. Its function is to
administer the WTO dispute settlement system. To this end it supervises
the process of consultation between disputing members; establishes panels
to settle disputes, adopts or rejects panel or AB recommendations; maintains
surveillance of implementation of rulings and recommendations, and eventually
authorizes retaliatory measures in cases of non-implementation of recommendations.

If a dispute arises between members of the WTO over their respective obligations,
first, each party may request the other to enter into consultations. Upon
failure of consultations, each party may propose to employ other dispute
settlement procedures (e.g., mediation, good offices, etc.). If these
alternative procedures also fail, the complaining party may request the
DSB to establish an ad hoc Panel. Panels conduct hearings on the dispute
and issue a report on the merits of the case. The recommendations contained
in the Panel's report become binding after their adoption by the DSB.
Adoption by the DSB is automatic unless all WTO members agree to reject
it. This is the main innovation lacking in the old GATT dispute settlement
system, where Panel reports had to be adopted by a consensus of GATT members
to become binding.

The Panel report may be appealed, but only on legal grounds before the
AB, a permanent body composed by seven individuals. The appeal is heard
before a three-person division of the AB, who may uphold, modify or reverse
the findings of the panel. The report of the AB is then to be adopted
by the DSB and has binding force unless, as in the case of the Panel report,
it is unanimously rejected.